Qualcomm Inc has agreed to pay a fine of US$975 million, the largest in China’s corporate history, ending a 14-month government investigation into anti-competitive practices.
The deal also requires Qualcomm to lower its royalty rates on patents used in China, likely helping local smartphone makers such as Xiaomi Technology Co Ltd (小米科技) and Huawei Technologies Co Ltd (華為).
China’s expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm’s opportunities have been clouded by the antitrust probe, which has also contributed to problems in collecting royalty payments from device makers.
Qualcomm on Monday said in a statement it would not contest the finding by China’s National Development and Reform Commission (NDRC) that it violated an antitrust law.
Asked whether the resolution in China could affect the outcome of ongoing antitrust probes into Qualcomm in Europe and the US, Qualcomm president Derek Aberle said: “We fully respect their authority, but we don’t believe it’s likely that other agencies will necessarily meet similar conclusions.”
The US firm cut its full-year earnings estimate, putting the cost of the fine at about US$0.58 per share, but it raised the lower end of its revenue forecast slightly.
“It removes a significant source of uncertainly from our business and positions our licensing group to really participate in the full growth of the wireless market in China,” Qualcomm chief executive Steve Mollenkopf said in a telephone interview.
Discussions in Beijing over one of the most contentious cases under China’s 2008 anti-monopoly law had intensified in recent weeks, culminating in meetings between Qualcomm senior executives and the NDRC on Friday last week.
Xu Kunlin (許昆林), head of the Commission’s Anti-Monopoly Bureau, said the US$975 million fine — equal to 8 percent of Qualcomm’s 2013 sales in China — was less than the 10 percent of sales maximum allowed under Chinese law because Qualcomm fully cooperated with investigators.
“Issuing the fine was not our primary purpose,” Xu told reporters yesterday, according to a Sina.com live-blog of his remarks. “Our purpose was to restore orderly, free-market competition. Qualcomm’s practices had stifled innovation.”
Under the terms of the agreement, Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents, widely used by Chinese device makers, separately from other patents. For companies opting for the new agreement, which applies to phones sold for use in China, Qualcomm will calculate royalties based on 65 percent of the phone’s selling price, instead of on the whole price.
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